WHAT IS IPO STOCKS? CONSULTING ENTERPRISES ON THE STOCK EXCHANGE
What is an IPO Stock? Have you ever learned about IPO, purpose, meaning of IPO, pros and cons of IPO and the best way to buy and sell IPO? Let's find out through the following article.
What is an IPO Stock? What does IPO mean? What does IPO stand for? IPO is considered as the first step in the process of publicizing the value of financial activities on the stock market. Issuing IPO shares is one of the important activities to help businesses improve their reputation in the market and attract investment capital in the fastest way. However, not all businesses fully understand what the IPO process is, let's find out with Emime what is an IPO stock and why every company needs to strive for an IPO.
I. What is an IPO?
What is an IPO?
Do you wonder what ipo stock is, what does IPO mean and what does IPO stand for? The English name of IPO is Initial Public Offering, which literally translates to "Initial Public Offering". The term IPO is used to refer to the initial issue of shares and listing on the stock exchange of a company with the purpose of raising capital widely from investors.
At that time, the enterprise will offer to sell a large enough number of shares to call on investors to contribute capital to the business operation of the enterprise in the future. After the initial public offering of IPO shares, the joint stock company will officially go on the stock exchange and become a public company, also known with a more complete name, a public joint stock company.
II. Purpose and meaning of IPO
Every business has a need to increase capital, especially at the time of starting a business and this is considered a top priority job, because thanks to capital from investors, the company can expand its scope. production and business activities and development on a larger scale, helping to diversify revenue sources and shorten the capital recovery process more effectively.
You already know what an IPO stock is, so what is the IPO plan? What do businesses need to do to complete the IPO plan? The issuance and listing of shares on the stock market for the first time of each business is called an IPO plan. IPO shares are the best way to increase the amount of outside investment in the business and create countless financial opportunities for both businesses and investors. This form of equitization is a good way to help employees in the company have the opportunity to own a certain amount of shares from the company, creating a deeper bond between employees and the business.
So what is the purpose of IPO shares or what is the purpose of an IPO plan? Here are the purposes that businesses who have worked hard to learn about what an IPO plan is and make it a unique, effective and indispensable business tool for every company:
- IPO shares help businesses affirm their resources and position on the stock exchange and in front of investors and customers, contributing to improving the brand value and reputation of their businesses.
- Implementing an IPO plan helps the process of raising capital from investors faster and more efficiently, helping businesses quickly expand their operation scale.
- A successful IPO plan will bring more practical value than issuing corporate bonds.
- Promoting equitization is a way to contribute to attracting potential, enthusiastic and responsible human resources, building a loyal, dedicated and dedicated staff.
- Successful IPO implementation is considered as a stepping stone for potential mergers and acquisitions of small and medium enterprises.
IPO is important for every business
Readers have learned about what an IPO means, what is an IPO stock and what is the purpose of an IPO plan, so you must be wondering what is the meaning of an IPO plan? The IPO plan is extremely important for businesses, especially for startups, small and medium enterprises that are in need of long-term investment capital. A successful IPO plan brings great meaning as follows:
- Initial Public Offering (IPO) is the first and most important challenge for any business, it proves that the business is ready to compete with all competitors and has the ability to stand firm in the market. fierce stock.
- What is the biggest meaning when a business implements an IPO plan - it is to mobilize capital from investors for the business as quickly as possible with a large mobilization scale from the stock market.
III. Pros and cons of an IPO
Above we have learned what IPO means, what is IPO Stock and what is the purpose of IPO plan. Next, we invite you to read about the advantages and disadvantages of the IPO plan.
As you know, the main goal of an IPO is to raise capital from outside for the business. The implementation of the initial public offering of IPO shares offers the following advantages:
- The company easily mobilizes capital quickly from the public such as large investors, angel investors, a large number of people with a large scale of capital mobilization from the stock market.
- A successful IPO plan creates a good image and polishes the company's brand, thereby creating a favorable stepping stone for subsequent stock issues.
- IPO shares make mergers and acquisitions (M&A) transactions simpler and more convenient. It's easy for companies to set target prices in buybacks when their shares are publicly listed.
- IPO shares on a public exchange contribute to the quality and accuracy of the numbers in the company's financial statements because the calculations in these reports must be made according to common standards set by the regulatory agency. regulation based on publicly listed dividends. From there, the company can easily call for investment capital from banks, credit institutions and from demanding investors.
- Issuing IPO shares help public companies to attract and retain good, dedicated and loyal employees because when offering IPO shares to the public, the company always spends a billion certain shares to sell to its employees with the desire to connect internally between the enterprise and the employees.
- What are the benefits of IPO stock options? Employees of the company will become shareholders and receive dividends after buying IPO shares and instead of just receiving a regular income, they have an additional passive income proportional to the company's profits. company. This makes employees in the company have a more effective work ethic and consider the existence and development of the company in the present and in the future as their success or failure.
- Public joint stock companies have the opportunity to approach business development strategies, build a professional management system when understanding what an IPO plan is and successfully issue IPO shares.
After knowing more about what are the benefits of IPOs, you wonder what are the limitations of IPOs? Let's find out what are the limitations of IPOs in the section below:
- Understanding what an IPO means, we know that IPOs disperse property ownership and can lead to loss of control of the business by the founding shareholders of the company due to the acquisition of the company by investors. or through mergers and acquisitions. Besides, the ownership structure of the enterprise is always fluctuating because it is influenced by stock transactions on the stock market on a daily basis.
- What are the limitations of the IPO stock issuance preparation process? To successfully implement the IPO plan, businesses have to spend a rather expensive and time consuming amount, especially the larger the company, the higher the issuance cost.
- Mandating companies to disclose information publicly on annual financial statements and tax reports can put the company at a disadvantage by disclosing too much business information to competitors. compete.
- IPOs cost businesses more time and additional expertise needed to manage and monitor the figures in the financial statements.
- In addition, every year the company has to pay some additional expenses such as audit costs for financial statements, costs of completing documents submitted to state management agencies on the stock exchange and public expenses. periodically publish information.
IV. Methods of offering IPOs
After learning what an IPO is, what are the advantages and disadvantages of an IPO plan, readers must also want to know how businesses offer IPOs? Based on the issued securities law, the form of IPO shares offering on the stock exchange is allowed to be carried out on the following methods:
- Through public media such as newspapers, television, Internet...
- Dutch auction (descending auction): is a form of auction when an item is offered for sale for a "heavenly" price, which can be much higher than its actual value. After that, a reverse auction will be held when the product price drops until one of the auction houses accepts to buy at the current price.
- There is a commitment guarantee
- Organize services with the utmost responsibility
- Form of buying wholesale, buying in bulk and offering retail
- Self-published on company website website
What are the legal procedures to participate in an IPO? Legal procedures for investors to participate in IPO are quite complicated with strict and complicated sanctions, to ensure objectivity during the whole IPO process. So before each IPO plan often needs different companies to support. For example, in the United States, law firms / securities companies or auditing firms will stand out to support businesses to implement IPOs.
V. Risks when deploying IPO
What are the risks of launching an IPO? There are 5 risks that businesses need to be aware of:
- Maximum transparency puts businesses in a difficult position in front of the public and competitors.
- The pressure to maintain growth of enterprises will increase due to investment from the stock market and shareholders.
- Many costs arise such as: Issuing fees, intermediary fees, accounting, consulting, investment banking...
- Gradually losing control of the business's operations because it had to pass votes from many shareholders after the IPO.
- The Board of Directors and major shareholders are responsible before the law for regulations, public reporting to the public.
VI. How to buy the best IPO shares
How to buy IPO shares? Investors need to know what is the best and most appropriate way to buy IPO shares? If you are an individual investor, buying IPO shares from businesses will contain many risks! However, we will help you know what to do before deciding to buy an IPO and what is the best way to buy an IPO.
1. Objective research
You need to research the company information through the IPO such as prospectus, public financial statements written by the company. Since there are no independent analysts in the market, this information is more polished than the actual situation. So the good things are better and the risks are also assessed lower.
Investors need to evaluate the industry, competitors, financial situation, press release to review the company in the most objective way. You need to be alert to analyze data, not to be disturbed by inflated information floating in the market.
2. Choose quality businesses and consulting firms
There are many businesses that go on the stock exchange for money, or are in a desperate situation, so they often praise and polish the company's brand with virtual numbers without understanding what an IPO is, even brokerage. Because of the pressure on sales and tasks, the stock market is also ready to "cheat" with investors without thinking about the consequences.
Therefore, when deciding to invest, you need to choose quality, reputable securities companies with clear products, less manipulation and more transparent information.
3. Carefully refer to the prospectus
When implementing an IPO plan, companies need to publicize a prospectus, sharing the most truthful information about the company's financial position. Although the prospectus is written by the company, there will still be inaccurate information so you should not trust it completely but it is imperative that you read it.
Note when reading the prospectus, what do you need to pay attention to the amount of money raised in the IPO for? If the prospectus says that the money is going to pay off the debt, you must carefully think whether to invest it or not!
4. Be patient and try to wait
When you learn what an IPO is, you must have also noticed the details that the company's leaders can through the IPO to run away and sell profit-taking shares, causing great losses to investors like MTM's runaway deal. . When deciding to invest, you should ask the management of the business to sign a commitment not to sell shares for a certain period, maybe half the project life. Then, if the leadership continues to hold the stock, you can buy it if you feel like investing further.
5. Caution is the top factor
If you know what an IPO plan is, you also understand that IPOs are always asymmetric information, as individual investors you often have less information about the company than large enterprises.
There are companies on the stock exchange that also underwrite shares, so if the shares are not sold out, the underwriter will buy money. So you need to be careful if you see a securities company offering to IPO!
Overall, the article has shown you the knowledge you need to know when learning about what IPO stocks are and the necessary notes when IPO as an individual investor. Initial public offering (IPO) is the stepping stone for a business to assert its value in the marketplace.
The above article has provided all the important knowledge to know about what an IPO is. Emime hopes the article has helped you gain more useful knowledge about the stock market. Good luck!